Did the IRS just lose $2 Trillion of American Taxpayer Money?

employee retention credit tax credits tax evasion tax tips

The IRS has been issuing warning after warning, on how ERC fraud is a huge problem. This is potentially a $2 trillion dollar fraud, according to Accounting Today!

Think of it this way… If the IRS has been defrauded by $2 trillion dollars, that’s our American tax money that’s just been stolen.

The IRS is angry and frustrated like I’ve never seen before, and they should be. I’m angry as well, and so should you be.

Employee retention tax credit fraud could be the biggest tax scam in government history.

It's much bigger than PPP and stimulus check fraud, making it the biggest issue the IRS has ever had to deal with. I've never seen anything like this.

Later in the video, I’ll even play some, never-heard-before sound bites, from the latest IRS Enforcement webinar, on ERC fraud. 

You’ve probably seen the ads with these companies, promoting $26,000 dollar tax credits per employee, and how they’re getting businesses, hundreds of thousands of dollars, back, in tax credits.

And now, these unscrupulous promoters advertise that just about anyone qualifies.

This tax credit is totally legitimate, but let's be real: when there's a bunch of “free” government money on the table and everyone's talking about it, unscrupulous companies will invariably try to cheat the system. Let’s call them ERC promoters for the sake of this discussion.

And in this case, many business owners have intentionally or unintentionally, gamed the system and may have ended up with, tens or even hundreds of thousands of dollars, in tax refunds, they may not actually be entitled to.

I’m not going to get into the specifics of who qualifies and how to qualify, but just know the rules to qualify are pretty straightforward, but these ERC promoters have stretched the qualification rules, and to make matters worse, they’ve put the ultimate responsibility back on the business owner’s, who are claiming the employee retention credits.

And in all likelihood, when the proverbial “shit hits the fan”, the ERC promoters will be long gone, and you’ll be on your own trying to figure out, where it all went wrong.

Here’s a pro tip: If you’ve already reached out to your CPA, accountant or tax professional, and they already told you that you didn’t qualify, then you probably don’t qualify for the ERC, regardless of what these fly by night ERC promoters tell you.

So if someone received a fraudulent ERC refund, how long can the IRS go after them?

This is a great question, because I see a lot of wrong answers including from tax professionals.

This question was actually included in the webinar. 

What is the Statute of Limitations to assess tax attributable to ERC that was reported fraudulently?

Think it over, let me know what you think.

A lot of people think it’s “b” three years. but it’s actually… “C” There is no statute of limitations.

Why is this? According to the IRS, and my old tax professor Mr. Rowe, fraud is forever. Meaning, if it’s a case involving fraud, there is no statute of limitations and it stays open forever. The IRS can go after you anytime until the day you die.

Here’s a quote from: IRS Commissioner Danny Werfel with a stern warning:

"Aggressive promoters present wildly misleading claims about this credit. They can pocket handsome fees while leaving those claiming the credit at risk of having the claims denied or facing scenarios where they need to repay the credit,"

According to Accounting Today:

A number of these ERC promoters have a clause in their agreement that promises that if the taxpayer gets audited, they will pay for the audit defense and will pay back any credits that the government reclaims.

That sounds great and all. But here’s the thing… I doubt these ERC promoters will be around to honor that clause in 3 years. 

Thanks for reading, and see you in the next blog post.

About The Author

Noel Lorenzana is an Illinois-licensed, Registered Certified Public Accountant with over 20 plus years of experience.

Through his online educational content, YouTube videos, easy-to-understand courses and 1-on-1 consulting, he gives you the tools to become tax savvy for yourself. 

Disclaimer: Any accounting, business or tax advice contained in this article, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.